Auto dealer penalized for use of insurer’s internet quoting system

Alberta’s broker regulator has issued an $8,000 civil penalty against an auto dealership, Avenue Motors Ltd., after an insurance company complained about alleged misuse of the insurer’s online quote generator by the dealership’s employees.

The dealership holds a Restricted Corporate Auto Dealership (Equipment Warranty) certificate of authority to transact insurance business insurance within Alberta, a fact that became a focal point in the Alberta Insurance Council’s decision. The dealership also holds a Restricted Certificate Auto Dealership (GAP) insurance certificate. These two licenses authorize the auto dealership to transact insurance business on restricted terms.

The issue started when an insurer — not named in the council’s decision — approached the Alberta Insurance Council with concerns that some of the dealership’s employees were misusing the insurer’s online quotation system to get favourable quotes for clients. The dealership denied the allegations.

During the council’s investigation into the matter, the insurer entered into evidence a cease-and-desist order to the dealership, dated Mar. 19, 2020. The letter summarizes the insurer’s complaint as follows:

“We have determined that Avenue Motors’ staff have been using the [insurer’s] website to place insurance for Avenue Motors’ own customers,” the cease-and-desist letter reads. “They are acting as agents for your customers to apply for and obtain auto insurance on the [insurer’s] site, sometimes paying down payments using corporate credit cards, and in some cases using AvenueMotors.ca email addresses. We believe that they have been impersonating customers on the phone at times.

“Some of the insurance policies in question have been purchased based on incorrect information relating to, among other things, insured’s name, address, email, date of birth, and driver’s license. We have heard this from your customers, and identified that the same electronic devices are repeatedly carrying out these transactions on behalf of different insureds. We have so far catalogued a number of instances where this has occurred. As a result, [the insurer] has insured persons who might otherwise be uninsurable, or for premiums that may be far less than required.”

When the insurer deemed that the behaviour hadn’t stopped after the decease-and-desist letter, it complained to Alberta’s broker regulator, which contacted the dealership about the insurer’s regulation.

Initially, through an employee, the dealership responded to the insurance council’s investigation on Oct. 29, 2020, as follows:

“Upon further investigation regarding [the insurer’s] complaint, we believe one of our previous employees, who no longer works with us, used a company credit card without authorization to sign up a customer on [the insurer’s website]. A discussion has been had with all staff regarding the severity of this and as a business we obviously do not want our credit card being used on any recurring items for customers. We are unaware of any conversation had by current employees where they impersonate any customers or used staff emails.”

After the council followed up, the dealership responded through a lawyer, who questioned the council’s jurisdiction to regulate the dealership’s activities. Essentially, the dealership noted it was not a broker or brokerage, and therefore the council had no authority to regulate it.

“My client is not an ‘agent’ in these allegations, so I have advised him not to sign [the council’s investigation report findings],” the dealership’s lawyer wrote to the council. “He does not accept that the complaint made by [the insurer’s legal counsel] is proper. [The insurer] operates an online insurance portal and therefore cannot make allegations of misuse by members of the public in the manner that he has done. If they want to confirm the identity of individuals from the general public (who they hope will purchase insurance from them) they should simply introduce additional identity protocols.”

Ultimately, the council disagreed with the dealership over jurisdiction, citing the fact that dealership held the restricted certificates of authority to transact insurance business.

While the council did not revoke the dealership’s certificates, it did issue a civil penalty of $8,000 against the dealership, representing $1,000 for each of the proven violations.

 

Feature photo courtesy of iStock.com/welcomia